🎯 In 30 seconds: Losses and gains are not symmetrical. Lose 10% and you need 11.1% to get back to even. Lose 50% and you need 100%. That is why traders who last think about how much they can lose before they think about how much they can make. The usual answer is to risk a small, fixed slice of the account on each trade, often 1%, counted after brokerage, STT and other charges, so that a run of losses hurts but never ends the game.
A cricket lesson before any strategy
Think of an opening batter in a Test match. The batter who slogs at every ball might hit a quick 30, but is usually back in the pavilion early. The one who leaves the dangerous balls outside off stump, and only plays the ones that suit them, is still batting after tea. Runs come to the batter who is still at the crease.
Trading works the same way. No method wins every trade. Even a good one has losing weeks and losing months. If one bad stretch wipes out your account, you never get to bat through the good stretch that follows.
So the first question is not "what should I buy?" It is "how much can I lose on this, and can I live with it?"
What SEBI found about Indian traders
SEBI, the market regulator, has studied the trading records of lakhs of Indian traders. The results are sobering.
- Intraday trading in shares. In SEBI's July 2024 study of the equity cash segment, 71% of individual intraday traders made a net loss in FY23 (April 2022 to March 2023). Among those who traded very often, more than 500 trades a year, 80% lost money.
- Futures and options. SEBI's September 2024 study found that 93% of over 1 crore individual F&O traders lost money over FY22 to FY24, with an average loss of about ₹2 lakh per trader including transaction costs.
- The latest year. SEBI's August 2026 study covering FY26 (April 2025 to March 2026) found 87.7% of individual derivatives traders were loss-makers, and the average loss per person was about ₹1.17 lakh.
You will see these studies again in Investing vs trading and Getting F&O enabled.
None of this means you cannot learn to trade. It means the default outcome is losing, and your first job is to keep losses small while you find out whether you have any skill at all.
The math of losses
When you lose money, you have a smaller amount left to grow. So the gain you need to recover is always bigger than the loss you took.
The formula is short:
gain needed = loss / (1 - loss)
Write the loss as a decimal. A 20% loss is 0.20, so the gain needed is 0.20 / 0.80 = 0.25, or 25%.
Check it with rupees. You start with ₹2,00,000 (₹2 lakh) and lose 20%. You now have ₹1,60,000. To get back to ₹2,00,000 you need ₹40,000 more, and ₹40,000 is 25% of ₹1,60,000.
| Loss | What ₹2,00,000 becomes | Gain needed to get back to ₹2,00,000 |
|---|---|---|
| 5% | ₹1,90,000 | 5.26% |
| 10% | ₹1,80,000 | 11.11% |
| 20% | ₹1,60,000 | 25% |
| 25% | ₹1,50,000 | 33.33% |
| 30% | ₹1,40,000 | 42.86% |
| 40% | ₹1,20,000 | 66.67% |
| 50% | ₹1,00,000 | 100% |
| 60% | ₹80,000 | 150% |
| 75% | ₹50,000 | 300% |
| 90% | ₹20,000 | 900% |
Notice the shape. Small losses are cheap to fix. Big losses are not. Recovering from a 50% loss means doubling your money. The Nifty 50 has returned roughly 10% to 12% a year on average since its 1995 base date, depending on whether dividends are counted (NSE Indices factsheet, September 2026). At that pace, doubling takes about six to seven years.
The same math explains why a +50% month followed by a -50% month leaves you down, not flat. ₹2,00,000 becomes ₹3,00,000, then ₹1,50,000. You are down 25% even though the two percentages seem to cancel out.
What a run of losses does to an account
Losing streaks are normal. With a method that wins half the time, the chance of at least five losses in a row somewhere in 100 trades is about 81%. Drawdowns and losing streaks has the full table.
So the useful question is: what does a streak do to your account at different risk levels? Risk per trade means the amount you lose if the trade hits your exit point, as a percentage of your whole account.
| Risk per trade | After 5 losses in a row | After 10 | After 20 |
|---|---|---|---|
| 0.5% | ₹1,95,050 | ₹1,90,222 | ₹1,80,922 |
| 1% | ₹1,90,198 | ₹1,80,876 | ₹1,63,581 |
| 2% | ₹1,80,784 | ₹1,63,415 | ₹1,33,522 |
| 5% | ₹1,54,756 | ₹1,19,747 | ₹71,697 |
| 10% | ₹1,18,098 | ₹69,736 | ₹24,315 |
| 25% | ₹47,461 | ₹11,263 | ₹634 |
All figures start from ₹2,00,000 and assume each loss is the stated percentage of what is left. That is why the numbers shrink a little more slowly than simple subtraction would suggest.
At 1% risk, ten straight losses cost you about 9.6%. That stings, but a 10.6% gain repairs it. At 10% risk, ten straight losses cost you 65%, and you need a gain of almost 187% to recover.
Risk of ruin
Risk of ruin is the chance that your account falls so far that you cannot or will not keep trading. Some people define ruin as zero. A more practical line is losing half your starting money, because very few people keep following their plan after that.
Here is a rough count of how many losses in a row it takes to cut an account in half at each risk level:
| Risk 1% per trade | 69 losses in a row |
| Risk 2% per trade | 35 losses in a row |
| Risk 5% per trade | 14 losses in a row |
| Risk 10% per trade | 7 losses in a row |
| Risk 25% per trade | 3 losses in a row |
Losses do not always come in one unbroken run, so a better test is the full probability. The table below gives it for 200 trades: the chance that the account drops to half its starting value at any point along the way. We estimated these for two made-up methods by simulating 400,000 random sequences of 200 trades each. They are not market data.
| Risk per trade | Method with an edge: wins 45%, wins are 2x losses | Method with no edge: wins 50%, wins equal losses |
|---|---|---|
| 1% | under 0.01% | under 0.01% |
| 2% | under 0.01% | 1.9% |
| 5% | 1.5% | 43.3% |
| 10% | 16.0% | 80.3% |
| 20% | 52.7% | 97.2% |
Two lessons stand out.
- A real edge does not save you from oversizing. The first method makes money on average. Risk 20% per trade with it and you still have a better than even chance of losing half your account within 200 trades.
- Small risk buys you time when you have no edge. Most beginners do not yet know whether they have an edge. At 1% to 2% risk, a no-edge trader is very unlikely to be cut in half in 200 trades, which leaves time to learn, review and stop if the results are not there.
The 1% rule, with Indian charges included
The 1% rule says: never risk more than 1% of your account on a single trade. Some traders use 2%. Many beginners do well to start at 0.5% or 1%.
This is the most misunderstood rule in trading. It does not mean you only put 1% of your money into a trade. It means the loss, if your exit is hit, should be no more than 1% of the account.
In India there is one more step. Every delivery trade pays STT of 0.1% on the buy and again on the sell, plus brokerage, exchange charges, stamp duty, GST and a DP charge when you sell (rates are explained in What trading really costs). A losing trade pays all of these too. So the 1% has to cover the charges, not just the price fall.
A worked example with a hypothetical company, Sharma Foods Ltd, and a hypothetical flat brokerage of ₹20 per order and ₹20 DP charge:
| Account | ₹2,00,000 |
| 1% risk budget | ₹2,000 |
| Buy price | ₹480 |
| Exit if wrong (stop) | ₹456 |
| Risk per share | ₹24 |
| Shares if you ignore charges: ₹2,000 / ₹24 | 83 |
| Loss on 83 shares at the stop, before charges | ₹1,992 |
| Charges on that round trip (STT, brokerage, exchange fee, stamp duty, GST, DP) | about ₹154 |
| Real loss | about ₹2,146, or 1.07% |
The fix is to set aside an estimate for charges first. ₹2,000 minus about ₹150 leaves ₹1,850 for the price risk. ₹1,850 / ₹24 = 77 shares. Now the loss at the stop is ₹1,848 plus about ₹148 of charges, close to ₹2,000. You put about ₹36,960 to work but planned to lose only 1% of the account.
The full method is in Position sizing. Where to put that ₹456 exit is covered in Stop losses.
Three Indian ways to lose more than you planned
A stop is a plan, not a guarantee. Three features of the Indian market can push a loss well past 1%.
- The 9:15 gap. Normal trading on NSE and BSE starts at 9:15 a.m. IST, after a pre-open call auction from 9:00 that sets the opening price. News that lands overnight, such as results or a global sell-off, shows up all at once in that opening price. If a stock closes at ₹470 and opens at ₹440, your ₹456 stop cannot sell at ₹456, because no trade ever happened there.
- Circuit limits. Many stocks have a daily price band of 2%, 5%, 10% or 20%. If a stock falls to its lower band and there are only sellers, trading at lower prices simply does not happen that day, and your sell order waits in a queue. A stock can stay locked like this for several days. Stop losses works through an example.
- Leverage. In futures and options you control far more than the money you put up. One Nifty 50 lot was 65 units from January 2026 (NSE revises lot sizes periodically, so check the current figure). At a hypothetical index level of 25,000, one futures lot controls ₹16,25,000 of index. A 1% index move is ₹16,250, which is 8% of a ₹2 lakh account, from one lot, in one move.
That third point is why F&O comes much later in this course, after Margin and Futures basics. The leverage that makes a small account feel big is the same leverage that empties it.
Why survival beats brilliance
A trader who makes 40% one year and loses 50% the next ends up down 30%. A trader who makes 8% two years in a row ends up up 16.64%. The second trader never had a headline year and still came out far ahead.
You see this pattern again and again. The traders who last are rarely the ones with the biggest wins. They are the ones whose losses stay small enough to recover from.
Risk control also protects your thinking. A loss of 1% is easy to accept and move on from. A loss of 20% in a day makes most people panic, freeze or try to win it back with an even bigger bet. Trading psychology covers why.
SEBI's own data shows how hard stopping is once losses pile up. In the September 2024 study, more than 75% of loss-making F&O traders kept trading F&O even after losing in consecutive years. Small risk per trade is what gives you the time to notice, review and change course before that happens to you.
Try it
Take a notebook or a spreadsheet and set a pretend account of ₹2,00,000. Open the NSE or BSE website and pick any three liquid stocks. For each, choose an entry near today's price and a stop below a recent low on the daily chart. Work out the share count with the 1% rule, first ignoring charges and then setting aside ₹150 for charges, and write both counts down. Then use the recovery table above to work out by hand the gain you need after a 15% loss and after a 35% loss. You should get 17.65% and 53.85%.
- After a 15% loss, what gain do you need to get back to even? Answer: About 17.65% (0.15 / 0.85).
- ₹2,00,000 gains 50% one month and loses 50% the next. Where do you end up? Answer: At ₹1,50,000, down 25%. The percentages do not cancel out.
- What does the 1% rule actually mean? Answer: The loss if your exit is hit, including charges, should be no more than 1% of the account. It does not mean you put only 1% of your money into the trade.
- Your account is ₹2,00,000 and you follow the 1% rule. You buy at ₹480 with a stop at ₹456 and set aside ₹150 for charges. How many shares? Answer: 77 shares (₹1,850 / ₹24, rounded down), about ₹36,960 in the trade.
- Why can a stop at ₹456 sell at ₹440? Answer: Because the stock can open at ₹440 at 9:15 after overnight news. No trade happened at ₹456, so the stop fills at the first available price.
Sources
- SEBI (July 2024): Analysis of intraday trading by individuals in equity cash segment
- SEBI press release (23 September 2024): 93% of individual traders incurred losses in equity F&O between FY22 and FY24
- SEBI (August 2026): Profitability of individual traders in the equity derivatives segment, FY25 to FY26
- NSE: SEBI turnover fees, STT and other levies
- NSE: Price bands
- NSE: Pre-open session
- NSE Indices: Nifty 50 factsheet (30 September 2026)
- NSE circular (3 October 2025): Revision in market lot of derivative contracts on indices